The typical buy side career path usually starts for someone a few years out of school, typically with 2 years of experience. Unlike large banks with comprehensive training programs, funds are smaller and don’t have the training resource to teach someone analytical finance from the ground up.
Which brings us to the typical route that will get you from your college graduation to a hedge fund portfolio manager.
To maximize your chance of getting to the buy side later in your career, the most common jobs straight after college are sell side equity research and investment banking. Both are great at teaching you the fundamentals of all-around financial analysis, including looking at company and industry trends, modeling and forecasting, valuation, and presenting your ideas in a clear, succinct way.
Besides research and banking, the next most common route is management consulting. In consulting you would get the same basic skill set, but with more emphasis on company strategic analysis. If you come from the consulting background, going into a hedge fund interview, just be extra prepared to sell your financial modeling skills.
One caveat is that for investing in technical and healthcare, having industry knowledge is immensely helpful. If you are a healthcare investor and you understand the nuances of a bio-tech’s research pipeline and the FDA approval process, you have a leg up against others in the industry. So if you are set on investing in a technical field, becoming a computer engineer or going into medical residency could actually be helpful before you jump to a hedge fund.
So let’s say that you’ve crossed to the buy side as a junior analyst. How long does it take for you to become a PM? It’s a more established route at a long-only traditional asset manager. Junior analysts usually step up to senior analyst after two to three years, then rise to portfolio manager after another 3 -4. You also need to take into account getting an MBA and a CFA, which is common among long-only portfolio managers.
But on the hedge fund side, this varies dramatically depending on the size of the fund. If you are at a large shop, the path looking similar to that at a long-only firm. But on the flip side, if you are the 2nd analyst joining a start-up hedge fund, and if the hedge fund is successful, you could be PM or even better, 2nd-in-command at a growing fund, where you could bring in multi-million dollar compensation after only a few years out of school. But of course, the higher reward comes with higher risk.